Gran Tierra Announces Meaningful Reserves Growth in Mid-Year 2023 Reserves Update

Source: 8/1/2023, Location: South America

• Highest Reserves in Company History - 94 MMBOE 1P, 150 MMBOE 2P and 212 MMBOE 3P
• Achieved 270% 1P, 433% 2P and 599% 3P Reserves Replacement
• Incurred F&D Costs Excluding Change in FDC of $8.55 (1P), $5.33 (2P) and $3.86 (3P) per boe
• Net Present Value Before Tax Discounted at 10% Increased to $2.2 Billion (1P), $3.3 Billion (2P), and $4.5 Billion (3P)
• Net Asset Value per Share of $25.45 Before Tax and $14.93 After Tax (PDP), $49.54 Before Tax and $27.28 After Tax (1P), and $84.39 Before Tax and $45.55 After Tax (2P)

Gran Tierra Energy Inc., a company focused on international oil exploration and production with assets currently in Colombia and Ecuador, today announced the Company’s 2023 mid-year reserves as evaluated by the Company’s independent qualified reserves evaluator McDaniel & Associates Consultants Ltd. (“McDaniel”) in a report with an effective date of June 30, 2023 (the “GTE McDaniel Reserves Report”).

All dollar amounts are in United States (“U.S.”) dollars and all reserves and production volumes are on a working interest before royalties (“WI”) basis. Production is expressed in barrels (“bbl”) of oil per day (“bopd”), while reserves are expressed in bbl, bbl of oil equivalent (“boe”) or million boe (“MMBOE”), unless otherwise indicated. The following reserves categories are discussed in this press release: Proved Developed Producing (“PDP”), Proved (“1P”), 1P plus Probable (“2P”) and 2P plus Possible (“3P”).

Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: “Gran Tierra continues to build on its five year track record of adding reserves through its successful development campaigns and enhanced oil recovery optimization programs. Our 2023 mid-year reserves update illustrates how the Company has achieved meaningful oil reserves additions through the strong results of its 2023 development drilling campaign and the Suroriente Block Continuation Agreement*. Furthermore, the reserves update is a testament to Gran Tierra’s ability to operate as a full-cycle exploration and production company which offers value to our stakeholders via the success we have achieved through the drill bit.

Gran Tierra’s first half 2023 development drilling program at the Costayaco field in the Chaza Block has resulted in the identification of new future potential well locations due to the success of the CYC-54 well, which was the most northern well drilled to date. In Acordionero, the enhanced oil recovery program via waterflood continues to produce as expected. Looking forward to the second half of 2023, we plan to build upon our successful exploration results in 2022 in Ecuador with further exploration drilling planned in both the Chanangue and Charapa Blocks in the Oriente Basin.

Despite a decrease in the Brent price forecast used in the mid-year 2023 McDaniel Reserves Report relative to the 2022 year-end McDaniel Reserves Report for the first 2.5 years of the evaluation, the combination of our successful development drilling campaign, the Suroriente Continuation Agreement*, our focus on maintaining low operating costs and our share buyback program that expired in May 2023 allowed Gran Tierra to achieve increases relative to 2022 year-end in net asset values per share** before tax of $49.54 (1P) (up 7%), and $84.39 (2P) (up 15%). With this significant growth in our net asset values per share** in the first six months of 2023, we look forward to finishing off 2023 strongly.”

• During the first half of 2023, Gran Tierra achieved:

o Increases in Before Tax NAV to $1.6 billion (1P), $2.8 billion (2P), and $4.0 billion (3P)
o Increases in After Tax NAV to $0.9 billion (1P), $1.5 billion (2P), and $2.1 billion (3P)
o Strong reserves replacement ratios of:
? 270% 1P, with 1P reserves additions of 16 MMBOE.
? 433% 2P, with 2P reserves additions of 26 MMBOE.
? 599% 3P, with 3P reserves additions of 35 MMBOE.
o Meaningful 1P, 2P and 3P reserves additions largely driven by success with development drilling and waterflooding results in the Chaza Block and the Suroriente Continuation Agreement*.
o Finding and development costs (“F&D”), including change in future development costs (“FDC”), on a per boe basis of $15.39 (1P), $12.65 (2P) and $11.18 (3P).
o F&D costs excluding change in FDC, on a per boe basis of $8.55 (1P), $5.33 (2P) and $3.86 (3P).
o F&D recycle ratios**, including change in FDC, of 2.2 times (1P), 2.7 times (2P) and 3.1 times (3P).
• Gran Tierra’s four major oil assets, Acordionero, Costayaco, Moqueta and Suroriente (all on waterflood) represent 84% of the Company’s 1P reserves and 74% of its 2P reserves.
• The Company’s PDP reserves account for 53% of 1P reserves and 1P reserves account for 63% of 2P reserves, which demonstrate the strength of Gran Tierra’s reserves base via the potential future conversion of Probable reserves into 1P reserves and Proved Undeveloped reserves into PDP reserves.
• FDC are forecast to be $512 million for 1P reserves and $864 million for 2P reserves. Gran Tierra’s 2023 base case mid-point guidance for cash flow*** of $295 million is equivalent to 58% of 1P FDC and 34% of 2P FDC, which highlights the Company’s potential ability to fund future development capital.

Increases in FDC relative to 2022 year-end reflect that the GTE McDaniel Reserves Report now assigns Gran Tierra 90 Proved Undeveloped future drilling locations (up from 78 at 2022 year-end and 61 at 2021 year-end) and 141 Proved plus Probable Undeveloped future drilling locations (up from 115 at 2022 year-end and 94 at 2021 year-end).

GTE McDaniel Reserves Report
All reserves values, future net revenue and ancillary information contained in this press release have been prepared by McDaniel and calculated in compliance with Canadian National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and derived from the GTE McDaniel Reserves Report, unless otherwise expressly stated. The GTE McDaniel Reserves Report has been prepared assuming that all outstanding conditions precedent to the effectiveness of the previously announced agreement between Ecopetrol S.A. (“Ecopetrol”), the national oil company of Colombia, and Gran Tierra (the “Suroriente Continuation Agreement”), by which the parties renegotiated the terms and the duration of the contract for the Suroriente Block in the Department of Putumayo, have been satisfied and that the Suroriente Continuation Agreement is effective. The Suroriente Continuation Agreement is not yet effective as certain conditions precedent have yet to be satisfied. See “Conditions Precedent to Suroriente Continuation Agreement” in this press release for additional information.

Future Net Revenue
Future net revenue reflects McDaniel’s forecast of revenue estimated using forecast prices and costs, arising from the anticipated development and production of reserves, after the deduction of royalties, operating costs, development costs and abandonment and reclamation costs but before consideration of indirect costs such as administrative, overhead and other miscellaneous expenses. The estimate of future net revenue below does not necessarily represent fair market value.

Total Company WI Reserves
The following table summarizes Gran Tierra’s NI 51-101 and COGEH compliant reserves in Colombia and Ecuador derived from the GTE McDaniel Reserves Report calculated using forecast oil and gas prices and costs. Gran Tierra has determined that Ecuador reserves, included in the Total Proved, Total Probable and Total Possible reserve categories for Light and Medium Crude Oil, are not material enough to present separately on a country basis. Therefore all amounts are presented on a consolidated basis by foreign geographic area.

Future Development Costs
FDC reflects McDaniel's best estimate of what it will cost to bring the Proved Undeveloped and Probable Undeveloped reserves on production. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities, and changes in capital cost estimates based on improvements in well design and performance, as well as changes in service costs. FDC for 2P reserves increased to $864 million at mid-year 2023 from $677 million at year-end 2022. The increase in FDC in 2023 was predominantly attributed to the increase in the numbers of future development well locations identified by McDaniel in the Suroriente Continuation Agreement.

Conditions Precedent to Suroriente Continuation Agreement
On April 11, 2023, the Company announced that it had entered into the Suroriente Continuation Agreement, by which the parties renegotiated the terms and the duration of the contract for the Suroriente Block in the Department of Putumayo, which was scheduled to end in mid-2024. The Suroriente Continuation Agreement provides an opportunity to add significant value, as well as economic life, to the Suroriente Block by continuing its duration for 20 years from the Suroriente Continuation Agreement's effective date. The effectiveness of the Suroriente Continuation Agreement is subject to certain conditions precedent including regulatory approval by the Superintendence of Industry and Commerce of Colombia ("SIC"). The satisfaction of such conditions precedent will determine the Suroriente Continuation Agreement's effective date. The following is a general description of such conditions precedent together with their status as of the date of this press release: (a) approval from the SIC, granted in June 2023 with no objections or conditions; (b) establish and agree to an inactive well action plan (reactivation or abandonment of 5 specific wells), Ecopetrol has agreed to the proposed action plan which is expected to be formalized in the coming weeks; (c) the posting of letters of credit amounting to approximately $123 million to guarantee the execution of the capital program stipulated by the Suroriente Continuation Agreement, to be issued and delivered once the condition precedent related to the inactive well action plan is satisfied; and (d) the payment of an agreed settlement relating to a minor amount of past production volumes to Ecopetrol on or before August 31, 2023.

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